Core Insights - The J. M. Smucker Company (SJM) experienced uneven results in fiscal 2026, with the Pet Foods segment significantly impacting overall performance [1] - The Pet Foods segment faced challenges, including a decline in sales and profit, primarily due to issues in the dog snacks category and the loss of a contract manufacturing agreement [2][3] - Other segments, such as Away From Home and coffee, showed growth, indicating potential for expansion despite the struggles in Pet Foods [4] Financial Performance - Pet Foods segment sales decreased by 8% to $368 million, with profit down 12% to $101.3 million [2][7] - The adverse impact on net sales was attributed to an 8-percentage point decline in volume/mix, while net price realization remained neutral [2] - Margins contracted by 130 basis points to 27.5% in the Pet Foods segment [2] Market Position and Competitors - J.M. Smucker competes with General Mills (GIS), The Kraft Heinz Company (KHC), and Mondelez International (MDLZ) [5] - The company anticipates fiscal 2026 net sales growth in the range of 3-5%, with comparable net sales expected to rise approximately 4.5-6.5% [5] - Competitors' projections for organic net sales growth vary, with General Mills expecting a range from a 1% decline to a 1% increase, Kraft Heinz projecting a decline between 1.5% and 3.5%, and Mondelez International forecasting around 5% growth [5]

Core Insights - The J. M. Smucker Company (SJM) is experiencing strong growth driven by its Uncrustables brand, with sales increasing in both U.S. retail frozen handhelds and international segments [1][11] - Uncrustables has expanded its consumer base beyond households, gaining traction in convenience stores, universities, and among athletes, which has helped maintain its resilience amid softer trends in other snack categories [2][11] - The company is investing in a new facility in McCalla, AL, to enhance production capacity and scalability, supporting long-term growth for Uncrustables [3][11] - Pricing strategies have positively impacted sales, with higher net pricing in the frozen handheld portfolio offsetting increased trade spending in peanut butter, while lower pre-production costs have eased margin pressures [4][11] - Uncrustables has evolved into a reliable growth platform for Smucker, characterized by strong consumer loyalty and improved production efficiency [5][11] Financial Performance - SJM shares have increased by 10.1% over the past three months, outperforming the industry, which saw a 3% decline, and the broader Consumer Staples sector, which fell by 2.1% [6] - The current valuation of SJM indicates it is attractively priced, trading at a forward 12-month P/E ratio of 11.27, compared to the industry average of 15.59 and the sector average of 16.92 [12]

Core Viewpoint - Argus downgraded J.M. Smucker from Buy to Hold due to ongoing struggles with volume growth and economic uncertainty impacting sales [1] Group 1: Financial Performance - J.M. Smucker is facing challenges with volume growth amid economic uncertainty, leading to price increases that are not sufficiently offsetting commodity inflation [1] - Rising green coffee prices and tariffs are exerting additional pressure on the company's margins [1] - Smucker shares are trading at 12 times projected FY27 EPS, which is lower than the peer average of 17, indicating a reasonable valuation under current inflationary conditions and weak coffee margins [3] Group 2: Strategic Initiatives - The divestiture of slower-growth pet food brands and the acquisition of Hostess Brands are seen as positive moves that could enhance cross-promotional efforts with Smucker's existing portfolio [2] - The company is expanding its Uncrustables brand into convenience stores as part of a revenue synergy strategy [2] Group 3: Future Outlook - Argus indicated that an upgrade could be considered if there are signs of sustainable margin and volume growth in the future [3]

Financial Data and Key Metrics Changes - The company raised its full year net sales guidance to 3% to 5% growth compared to the prior year, driven by strong performance in the coffee segment and Uncrustables [29][36] - Adjusted earnings per share guidance remains at $8.5 to $9.5, reflecting the impact of higher costs from U.S. tariffs [29][42] - The company aims to generate over $1,000,000,000 in free cash flow annually, with a long-term target for capital expenditures at approximately 3.5% of net sales [30][31] Business Line Data and Key Metrics Changes - The coffee segment is performing well despite record high green coffee prices, with favorable price elasticity of demand trends [6][39] - Uncrustables brand is expected to grow annual net sales to over $1,000,000,000, driven by marketing, distribution gains, and innovation [9][15] - The pet segment, particularly Meow Mix, is experiencing positive momentum, while Milk Bone faces challenges due to consumer caution in discretionary spending [17][60] Market Data and Key Metrics Changes - The U.S. retail coffee market shows resilience, with over 70% of coffee consumed at home, making it affordable despite inflation [39] - The convenience store channel is expanding for Uncrustables, with over 30,000 convenience stores now selling the product [14] - The cat food category is benefiting from pet population growth, with Meow Mix leading in new buyers [21][60] Company Strategy and Development Direction - The company is focused on long-term growth through brand building, innovation, and capital deployment strategies [4][30] - Key growth platforms include Cafe Bustelo, Uncrustables, Meow Mix, Milk Bone, and Hostess Brands, with a strong emphasis on consumer-led innovation [5][16] - The Hostess brand is undergoing a strategy to stabilize and position for long-term growth by reducing SKU count and enhancing marketing efforts [22][25] Management's Comments on Operating Environment and Future Outlook - Management expresses confidence in the company's ability to create long-term value for shareholders despite navigating a dynamic environment [5][28] - The company acknowledges challenges from inflation and tariffs but remains optimistic about sustaining organic growth [36][42] - Future expectations include low single-digit net sales growth and a commitment to a disciplined capital deployment model [30][33] Other Important Information - The company has increased its dividend for the twenty-fourth consecutive fiscal year, reflecting a commitment to returning capital to shareholders [32] - The company plans to prioritize debt reduction, aiming to pay down $500,000,000 of debt annually [31] Q&A Session Summary Question: Key takeaways from recent results - The company delivered 3% comparable growth and raised top line guidance based on strong coffee performance and Uncrustables [34][36] Question: Coffee category consumer behavior - The coffee portfolio is performing well due to affordability and strong brand positioning, despite significant inflation [39][40] Question: EPS outlook and reinvestment strategy - The company aims to balance earnings recovery with reinvestment in brand growth, expecting sequential improvement in margins [46][47] Question: Progress in Sweet Baked Snacks - The company is focused on stabilization and expects sequential profit improvement, with positive trends in key customer channels [48][49] Question: Uncrustables performance and competition - Uncrustables continues to perform excellently with strong distribution gains and innovation, maintaining a competitive edge through brand building [51][55] Question: U.S. Retail pet foods outlook - Meow Mix is performing well, while Milk Bone faces challenges; however, innovation and brand building efforts are expected to drive recovery [59][60]

Financial Data and Key Metrics Changes - The company raised its full-year net sales guidance to 3% to 5% growth compared to the prior year, driven by strong performance in the coffee segment and Uncrustables [34][39] - Adjusted earnings per share guidance remains at $8.50 to $9.50, reflecting the impact of higher costs from U.S. tariffs [34][35] - The company aims to generate over $1 billion in free cash flow annually, with a disciplined capital deployment model [3][35] Business Line Data and Key Metrics Changes - The coffee segment is performing well despite record-high green coffee prices, with favorable price elasticity of demand trends [4][42] - Uncrustables brand is expected to exceed $1 billion in annual net sales, driven by marketing, distribution gains, and innovation [10][34] - The pet segment, particularly Milk-Bone and Meow Mix, is experiencing growth, with Milk-Bone's Peanut Buttery Bites being a significant innovation [18][56] Market Data and Key Metrics Changes - The U.S. retail coffee market shows resilience, with over 70% of coffee consumed at home, making it affordable despite inflation [42] - The cat food category is benefiting from positive pet population trends, with Meow Mix showing strong momentum [21][56] - The frozen handheld and spreads market is seeing increased distribution for Uncrustables, now available in over 30,000 convenience stores [16][51] Company Strategy and Development Direction - The company is focused on long-term growth through brand-building and innovation, particularly in key growth platforms like Café Bustelo and Uncrustables [3][4] - A strategy to reduce SKU count by 25% for the Hostess brand aims to simplify offerings and enhance profitability [22][32] - The company is committed to maintaining a balanced approach to capital deployment, including debt reduction and dividend growth [35][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a dynamic environment while delivering organic growth [39][40] - The outlook for coffee remains strong, with expectations of continued resilience despite significant inflation [45][46] - Management anticipates sequential profit improvement across various segments, including Sweet Baked Snacks and Uncrustables [49][50] Other Important Information - The company is closing its Indianapolis manufacturing facility, which is expected to deliver $30 million in annual cost savings [22] - The Milk-Bone brand is leveraging cultural relevance to connect with younger consumers, enhancing its market position [19][20] Q&A Session Summary Question: What are the key takeaways from recent results? - The company delivered 3% comparable growth and raised its top-line guidance, primarily due to strong coffee performance [39][40] Question: How is the coffee category performing in terms of consumer behavior? - The coffee portfolio is performing well, with consumption remaining solid due to affordability at home despite inflation [42][43] Question: What are the expectations for Uncrustables moving forward? - Uncrustables is expected to continue its strong performance with new distribution and innovative product offerings [51][53]

Financial Data and Key Metrics Changes - The company increased its free cash flow outlook from $875 million to $975 million for the full fiscal year, driven by benefits from the One Big Beautiful Bill Act, which will provide ongoing annual benefits [40][41] - The midpoint guidance for the full year remains at $9, with expectations for overall growth despite increased tariffs impacting costs [9][10][29] Business Line Data and Key Metrics Changes - The coffee segment is expected to see pricing benefits in the mid-20% range, with anticipated volume impacts in the low to mid-teens, leading to overall growth in the low to mid-teens year over year [8][10][56] - Milk Bone is projected to return to growth in the second half of the fiscal year, supported by advertising and innovation, despite cautious consumer spending in discretionary categories [17][19] - The Sweet Baked Snacks segment is undergoing SKU rationalization, with expected savings of $30 million, and profitability is anticipated to improve sequentially throughout the fiscal year [31][65] Market Data and Key Metrics Changes - The company is seeing positive momentum in its coffee portfolio, with strong margins expected in the fourth quarter, and ongoing benefits from stabilization efforts within the Hostess portfolio [35][36] - The away-from-home business continues to perform well, contributing positively to the overall portfolio [44] Company Strategy and Development Direction - The company is focused on strategic investments, consumer-led innovation, and shifting its portfolio towards growth, while managing controllable factors and reacting positively to external challenges [74] - A dedicated sales organization is being implemented to enhance execution and focus on key areas, particularly in the convenience store channel [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the impact of increased tariffs on coffee, which has led to a net $0.25 impact on guidance, but remains optimistic about the resilience of the coffee category and the strength of its brands [57][68] - The company continues to monitor the impact of GLP-1 drugs on consumer behavior but has not observed any significant effects on its product categories thus far [50][62] Other Important Information - The company is actively engaging with industry associations to advocate for favorable trade policies and tariff relief, particularly concerning coffee [49] - The company plans to achieve a three times leverage profile by the end of fiscal 2027 through ongoing debt paydown efforts [41] Q&A Session Summary Question: Updated expectations on coffee pricing benefits due to tariffs - The coffee segment's pricing outlook has shifted to the mid-20s, with additional pricing actions expected in early winter due to increased tariffs [8] Question: Changes in EPS guidance and quarterly performance - The overall profit outlook remains intact, with some profit shifting to the third and fourth quarters due to timing of coffee costs [29] Question: Clarification on SKU rationalization impact - SKU rationalization is ongoing, and while it has not impacted first-quarter volume, it is expected to improve profitability over time [25][31] Question: Future visibility and confidence in fiscal 2027 - The company is optimistic about strong margins in the coffee portfolio and ongoing growth in key brands, providing a positive outlook for fiscal 2027 [35][36] Question: Impact of GLP-1 drugs on consumer behavior - Management has not seen a meaningful impact from GLP-1 drugs on its categories, as the products remain appealing to consumers [50][62] Question: Timing of benefits from SKU rationalization - The company expects to see about $10 million in savings from SKU rationalization in the fourth quarter, with the remaining benefits impacting fiscal 2027 [31] Question: Clarification on tariff impacts and potential exemptions - Should tariff relief be granted, the company would revise its guidance accordingly, but timing factors would affect the realization of benefits [68]

Oh, hey, that's me. I'm looking at all these I don't know mascots for the Big 10. Sorry.>> Right. Well, you got Abbott Labs here, Blood. >> We got Abbott Labs and Blood and then we got a bunch of Big 10 mascots and we're still trying to figure that out.But you know what we can figure out is a Mad Dash. What do you >> Okay, David. Smuckers, the stock, as Carl mentioned, is down really badly.And u September 11 of 2023, they bought a company called Hostess. Okay. And they paid $5.6% six billion dollars includi ...

Financial Data and Key Metrics Changes - Total company comparable net sales increased by 2%, and when excluding contract manufacturing sales related to divested pet food brands, net sales increased by 3% compared to the prior year [6][31] - Adjusted gross profit decreased by $89 million or 11% compared to the prior year, reflecting higher commodity costs and unfavorable volume mix [33] - Adjusted earnings per share was $1.90, a decrease of 22% versus the prior year, driven by reduced gross profit and increased marketing investments [35][48] Business Line Data and Key Metrics Changes - Uncrustables brand grew net sales in double digits, driven by national advertising and distribution gains [7][11] - Cafe Bustelo brand net sales increased by 36%, with a 17% increase in volume mix [11] - Milk Bone brand experienced a decline in net sales due to lapping prior year distribution gains, while Meow Mix brand saw an increase in volume mix [12][13] - Sweet Baked Snacks segment net sales decreased by 24%, primarily driven by a decrease in snack cakes [38] Market Data and Key Metrics Changes - In the U.S. retail coffee segment, net sales increased by 15%, with net price realization contributing an 18 percentage point increase [35] - Pet foods segment net sales decreased by 8%, reflecting declines in dog snacks and contract manufacturing sales related to divested brands [37] - International and away from home segment net sales grew by 7%, driven by strong performance in the away from home business [27][39] Company Strategy and Development Direction - The company is focused on three strategic priorities: accelerating organic growth, embedding transformation, and fostering a bold mindset [5][18] - Actions include prioritizing resources towards key growth platforms and optimizing SKU counts to improve operational efficiencies [14][15] - The company aims to generate over $1 billion in free cash flow annually and has achieved $100 million in total run rate synergies from the Hostess Brands acquisition [17][18] Management's Comments on Operating Environment and Future Outlook - Management noted that the external environment remains dynamic, with ongoing input inflation and changes in consumer behavior impacting outlook [42] - The company anticipates net sales to increase by 3% to 5% for the fiscal year, reflecting improved price elasticity of demand assumptions [42][43] - Management remains confident in the long-term growth outlook and the ability to deliver shareholder value despite external challenges [29][49] Other Important Information - The company plans to prioritize debt reduction, aiming to pay down approximately $500 million of debt in each of the next two fiscal years [41] - Free cash flow projection has been increased by $100 million to approximately $975 million, driven by accelerated R&D and tax deductions [47] Q&A Session Summary Question: What are the expectations for the coffee segment given the current inflationary pressures? - Management indicated that the coffee category remains resilient despite inflation, with approximately 70% of coffee drinking occasions occurring at home, providing an affordable alternative to coffee shops [22][29] Question: How is the company addressing the challenges in the Sweet Baked Snacks segment? - The company is taking decisive actions to stabilize the Hostess brand, including SKU optimization and closing a manufacturing facility to improve margins and operational efficiencies [14][15] Question: What is the outlook for the pet food segment? - Management expressed confidence in the long-term growth outlook for the pet portfolio, driven by positive pet population trends and premiumization opportunities [25][29]

Financial Data and Key Metrics Changes - The company reported a 1% decrease in net sales for the first quarter, while comparable net sales increased by 2%, excluding prior year sales related to divested businesses and foreign currency exchange [31] - Adjusted gross profit decreased by $89 million or 11% compared to the prior year, primarily due to higher commodity costs and unfavorable volume mix [33] - Adjusted earnings per share was $1.90, a decrease of 22% versus the prior year, but exceeded expectations due to better-than-anticipated net sales [34] Business Line Data and Key Metrics Changes - In the US retail coffee segment, net sales increased by 15%, driven by an 18 percentage point increase from net price realization [34] - The US retail pet foods segment saw a decrease in net sales by 8%, primarily due to a decline in dog snacks and lower contract manufacturing sales related to divested pet food brands [36] - The Sweet Baked Snacks segment experienced a 24% decrease in net sales, with a 54% decrease in segment profit reflecting unfavorable volume mix and higher costs [37] Market Data and Key Metrics Changes - The away from home business grew net sales by 14% on a comparable basis, driven by coffee and Uncrustables sandwiches [39] - International net sales decreased by 6% on a comparable basis, primarily reflecting a decrease in the coffee portfolio [39] - The company anticipates a higher US tariff impact on green coffee costs, which is expected to be a 50¢ headwind for the fiscal year [29] Company Strategy and Development Direction - The company is focused on three strategic priorities: accelerating organic growth, embedding transformation in everyday operations, and fostering a bold mindset [5] - The Uncrustables brand is projected to generate over $1 billion in net sales by the end of the fiscal year, continuing strong double-digit growth [11] - The company is reducing SKU count by 25% for the Hostess brand to improve operational efficiencies and drive margin expansion [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the external environment remains dynamic, with ongoing input inflation and changes in consumer behavior impacting the fiscal year outlook [41] - The company is revising its full-year net sales expectations to increase by 3% to 5%, primarily due to the strength of the coffee portfolio [28] - Management remains confident in the long-term growth outlook and the ability to deliver shareholder value despite external challenges [30] Other Important Information - The company achieved $100 million in total run rate synergies from the Hostess Brands acquisition [16] - Free cash flow for the first quarter was negative $94.9 million, reflecting a decrease in cash provided by operating activities [39] - The company plans to prioritize debt reduction, aiming to pay down approximately $500 million of debt in each of the next two fiscal years [40] Q&A Session Summary Question: What are the expectations for the coffee segment? - The coffee segment is expected to remain resilient despite inflationary pressures, with approximately 70% of coffee drinking occasions occurring at home [21] Question: How is the company addressing the impact of tariffs? - The company is working to mitigate cost increases through alternative sourcing strategies and responsible pricing [45] Question: What is the outlook for the Sweet Baked Snacks segment? - The Sweet Baked Snacks segment is anticipated to improve sequentially, with increased dollar sales and volume growth noted in the Hostess brand [25]

Company Overview - The J. M. Smucker Company (NYSE: SJM) is known for its iconic American food brands, including Jif, Folgers, Smucker's, and Uncrustables [1] - The company is expanding its growth potential through recent acquisitions, notably Hostess Brands, which is recognized for its snack products [1] Analyst Background - The analyst has over 10 years of experience researching companies across various sectors, including commodities and technology [1] - The analyst has researched more than 1000 companies and has transitioned from writing a blog to creating a value investing-focused YouTube channel [1] - The analyst expresses a particular interest in metals and mining stocks, while also being comfortable with consumer discretionary/staples, REITs, and utilities [1]